Alaska, Hawaii talk about natural gas deals

August 24, 2012

ANCHORAGE, Alaska - Alaskans hoping to find markets for natural gas may one day find buyers in Hawaii, but neither state is ready for deals to be signed.

Industry and government experts speaking Thursday at a panel discussion organized by U.S. Sen. Mark Begich, D-Alaska, said a steady supply of Alaska natural gas is not ready to move and Hawaii is not ready to receive it.

Vast gas resources on Alaska's North Slope and more that could come from offshore drilling in the Arctic Ocean remain stranded without a means of getting to market. A hoped for multibillion-dollar pipeline to markets in other Mainland states has been put on hold in part because the country is awash in natural gas from shale gas production and other sources.

Article Photos

U.S. Sen. Mark Begich, D-Alaska, discusses opportunities for the sale of natural gas to Hawaii and other Pacific markets as Dale Hahn of the Hawaii lieutenant governor’s office listens Thursday in Anchorage.AP photo

Drilling at the Cook Inlet fields south of Anchorage has been revitalized with state incentives, and the geology and recent discoveries suggest there will be enough gas for Alaska utilities and a surplus for export, said Ethan Schutt, a senior vice president for Cook Inlet Regional Inc., a major landholder.

However, execution and timing are more uncertain, he said. Federal conservation units around the inlet add to the cost of infrastructure development, he said. There's also a shortage of drilling rigs.

"We'll get there," he said. "It's just a question of whether it will be two years or five years."

On the Hawaii side, Robert Isler of Hawaiian Electric Co. said power generated by diesel is some of the most expensive in the nation. Utilities are making a transition to renewables and are looking to liquid natural gas as another potentially cheaper, cleaner alternative that could help pass environmental review.

The state, however, will not be in position to line up suppliers until it makes decisions on infrastructure, such as where and how to dock LNG tankers and how to convert to gas-fueled power generation, he said.

There's also the perennial question of the Jones Act, said Larry Persily, federal coordinator for Alaska natural gas pipeline projects.

For commercial cargo moved between two domestic ports, the law requires the use of vessels that are built, owned, registered and crewed by U.S. citizens. That would add expense to Alaska natural gas competing with supplies from Australia, Canada, Indonesia or elsewhere.